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Returns of 5.5% for the global equity market and 1.9% for the UK bond market might suggest that the second quarter of 2025 was plain sailing for investors. The result is undeniably good, but the journey there involved the 5th largest 2 day sell-off for US stocks since World War 2, followed by a 17% rebound (in US stocks) to help close the quarter back in positive territory!
Political volatility dominated early in the quarter after President Trump’s new tariff proposals sent markets reeling. But a rapid U-turn — the now-familiar “TACO” (Trump Always Chickens Out) trade — helped sentiment recover sharply.
The real story, however, was resilience. US companies, especially in tech and banking, posted strong earnings and held firm on AI investment. Consumers kept spending, even in the face of weak confidence readings. Overall, US corporates are still forecast to grow profits by ~9% in 2025,[1] a far cry from crisis-level revisions of the past.
UK equities gained 4.4%, with small- and mid-cap takeover activity a major contributor. With 31 bids so far this year and an average premium of 43%, buyers continue to see value. UK banks also impressed, the sector up 24% year-to-date[2].
While UK inflation remains elevated, signs of labour market softening may give the Bank of England scope to cut rates later this year.
Currency weakness was another theme: the USD had its worst H1 since 1973, though we continue to view the dollar as a core long-term holding.
Despite political noise, Q2 delivered strong outcomes for investors. Our focus remains on high-quality companies, global diversification, and active rebalancing — a strategy that continues to reward over the long term.
The value of investments and the income from them can go down as well as up and you could get back less than you invested. Past performance is not a reliable indicator of future performance.
The content of this article is not intended to be or does not constitute investment research as defined by the Financial Conduct Authority. The content should also not be relied upon when making investment decisions, and at no point should the information be treated as specific advice. The article has no regard for the specific investment objectives, financial situation or needs of any specific client, person, or entity.
[1] Source: Factset
[2] Source: Peel Hunt
